Mortgage Brokers; NEW RULES

"California mortgage brokers face closer scrutiny as the state adopts a federal law aimed at curbing the fraud and abuse that helped decimate the housing market.

Brokers in the nations most populous state will be required by July 31 to have passed criminal-background and credit checks, as well as licensing exams. California, along with about a third of U.S. states, previously didnt require mortgage sellers to have individual licenses.

Thats about to change as all states by Jan. 1 must implement the national rules, which Congress developed after record mortgage defaults and foreclosures were triggered by rampant lending to people who couldnt afford to repay their loans or never intended to. Brokers will be assigned identification numbers to enable regulators and borrowers to track their lending histories.

When someone buys 100 shares of stock, they must go through a licensed securities broker, said Senator Dianne Feinstein, a California Democrat and co-sponsor of the law, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008. Until recently, some purchased their home -- a far more valuable asset -- through an independent mortgage broker or lender who may have had a criminal background or no license at all. This lack of accountability enabled unscrupulous brokers to commit fraud at the expense of unsuspecting homebuyers.

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